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It is never too easy to leave one’s home and move into aged care, but it does not have to be a terrifying experience. An aged care home can provide services and care which is required to maintain the quality of life.
Residential aged care facility is a home for an older person who can no longer live or does not want to live at his/her home and require health care or help for performing everyday activities.
In Australia, government funds a variety of aged care homes to deliver care and other support services to the people who require them. Residential aged care homes could assist with day-to-day tasks, in addition to personal as well as nursing care, by providing accommodation, hotel type services and care services.
Australian Bureau of Statistics (ABS) has studied about the future demand for aged care facilities, observing that the requirement for aged care facilities would go up in the coming years. Consequently, there is an excellent opportunity for aged care service providers.
As per the ABS forecast, in the forthcoming years, there would be a higher aging population, thus the requirement of aged care groups is likely to increase in intensity.
In this article, we are discussing ASX-listed aged care stock Japara Healthcare Limited, which has a strong developmental pipeline and performed well in the first half of 2020 despite a difficult period across the aged care sector with ongoing margin compression along with reducing occupancy as elevated levels of supply continue.
About Japara Healthcare Limited (ASX:JHC)
Southbank-headquartered aged care service providing company, Japara Healthcare Limited (ASX:JHC) is a leader in delivering retirement living services and residential aged care in Australia. Its portfolio comprises more than 5,000 existing or soon to be constructed aged care places with several co-located senior living communities.
The Company offers all types of aged care facilities from high and low care for the short as well as long term. It provides facilities including many complementary health services, such as dental and podiatry services, dietician and physiotherapy, as per the requirement.
Revenue Up 9.9% and NPAT Down 28% in First Half
On 28 February 2020, Japara Healthcare updated the market with half-yearly results for the period ended 31 December 2019.
Financial Highlights
- Japara recorded total revenue of approximately $212.6 million, up by 9.9% from the same period a year ago.
- EBITDA of the Company increased by 10% year on year to approximately $24.3 million from $22.1 million in the first half of FY2019, driven by additional residents in new and extended homes and from portfolio management of real estate assets.
- Net profit after tax (NPAT) was noted at ~$5.4 million, down by 28% from $7.6 million in 1H FY2019, impacted by development activities.
- The Company declared a 50% franked interim dividend of 2.0 cents per share, scheduled for payment on 30 April. 2020.
- Balance sheet strength of the Company was maintained with net bank debt of nearly $185.3 million at 31 December 2019 and available funding of ~$160 million.
Operational Highlights
- A dedicated workforce of over 5,800 staff provided more than 4,000 residents with personalised care 24 hours a day, seven days a week.
- Ongoing 100% accreditation record maintained with 20 Aged Care Quality and Safety Commission visits in the first half of the fiscal year 2020.
- For the first half of the financial year 2020, total operational places increased by 3.5% to 4,385.
- Opening of new homes in 106 places at Robina and extensions in 60 places at Kingston Gardens, 25 places at Brighton-Le-Sands and 18 places at Mirboo North.
- Continued strong earnings contribution from recently completed greenfield and brownfield developments and refurbishments.
Outlook FY2020 and Beyond-
- Given the occupancy level remains below historic levels and challenges in the funding environment are continuing, the Company anticipates EBITDA in FY2020 to be 10% lower than FY2019.
- Recently completed developments are likely to aid in mitigating industry headwinds, as they progressively contribute to EBITDA.
- Costs of interest and depreciation are also anticipated to rise slightly in the second half of the fiscal year 2020, due to recently completed developments.
- Japara continues to focus on the delivery of its developments with more than 300 net new places likely to be commenced in the financial year 2020.
- The Company intends to continue paying full-year dividends of up to 100% of net profit after tax.
Near-term development pipeline of JHC comprising 844 net new places-
Meanwhile, Japara’s CEO Andrew Sudholz stated that some of the Company’s homes were impacted by both bushfires and floods. However, he is thankful to the staff and various state emergency services for their attempts to ensure that all residents and staff of the Company are remained safe during these events.
Stock Performance
On 02 March 2020, the stock of JHC was trading at $ 0.870, down by 2.222 per cent (at AEDT 12:59 PM). The market capitalisation of the stock was at around $ 240.52 million, with nearly 267.25 million shares outstanding. The 52 weeks high and low price of the stock was noted at $1.550 and $ 0.810, respectively. JHC stock has generated a negative return of 9.55 per cent on a year to date basis and 18.18 per cent in the previous six months.
